Thai government approves Thai Airways restructuring plan via bankruptcy court

Aviation Updates Philippines – The Thai government on Tuesday (May 19) approved a plan for Thai Airways to be restructured through a bankruptcy court, after weeks of flight cancelations caused by the COVID-19 pandemic further crippled the loss-making airline.

"It is a difficult decision but it is in the national and public interest," Prime Minister Prayuth Chan-o-cha said at a news briefing.

"The government has reviewed all dimensions...we have decided to petition for restructuring and not let Thai Airways go bankrupt. The airline will continue to operate," he added.

On Monday, the Thai government announced that it would be submitting a rehabilitation plan to restructure the business with the Central Bankruptcy Court, instead of pursuing a previous plan to seek a 58.1 billion baht (US$1.8 billion) rescue package from the government. This move would allow Thai Airways to enter a rehabilitation process under an order to be issued by the Thai bankruptcy court.

"It is similar to filing Chapter 11 in the United States," government spokeswoman Narumon Pinyosinwat said.

In the United States, a Chapter 11 bankruptcy filing protects a company from creditors while it restructures or sells assets in order to improve its finances. Its Thai equivalent is Chapter 3/1 of the Corporate Reorganisation section of the Bankruptcy Act.

According to Pinyosinwat, the plan for rehabilitation via bankruptcy court was presented earlier on Monday by the Ministry of Transport and was approved by Prime Minister Prayut Chan-o-cha, who serves as chairman of the State Enterprise Policy Office.

The plan was presented to the cabinet on Tuesday, who then gave it their approval.

The complete details of the rehabilitation plan are still unknown, but it is believed that it would likely involve retiring older and bigger aircraft such as the Boeing 747-400 and Airbus A380-800. 

Though some observers believe that the rehabilitation may also lead to staff cuts, the Prime Minister said that Thai Airways' 20,000-member staff would not lose their jobs.

"With professional management, it will regain its strength. Its staff will keep their jobs and it will be restructured. The court will decide the details," he said.

It is also widely speculated that the government's stake in Thai Airways could fall below 50% as a result of this restructuring. If this happens, the State Enterprise Committee would lose its authority over the carrier.

The airline, which turns 60 years old this year, is currently 51% owned by the Ministry of Finance.

Despite media reports and the announcement made by a senior government official on Monday, the airline issued a statement later that evening denying rumors that it plans to file for bankruptcy.

In a statement, the airline said that a reform plan had been approved by the board on April 17 and was presented to the State Enterprise Policy Office for consideration on April 29.

"The Board of Directors made no resolution to file for bankruptcy as appeared in the news. Thai Airways again denies the bankruptcy rumors," it added.

After the Thai Cabinet's decision was officially announced on Monday, however, the airline issued another statement acknowledging the restructuring plan, saying that it will continue to run its business as usual while the plan is being implemented under the law.

"Although THAI's reform plan will be implemented and exercised through the business reorganization under the bankruptcy law, THAI will not be dissolved or go into liquidation or be declared bankrupt," the airline said in a statement on its website.

"THAI is committed to [doing] everything possible to emerge from the crisis situation. This is an important step for THAI to change in order to become a stronger and more sustainable entity. THAI expressed its gratitude to all concerned in every sector of the economy, shareholders, partners, alliance, customers, and in particular all THAI passengers for their continued support and confidence in the airline," it added.

The COVID-19 pandemic is the latest blow to the struggling carrier, which had already been facing problems long before the outbreak began. The airline lost 12 billion baht (US$374.3 million) in 2019, 11.6 billion baht (US$361.9 million) in 2018, and 2.11 billion baht (US$65.8 million) in 2017. It also suffered losses in 2013, 2014, and 2015. 

The airline was forced to cancel all of its flights in early April as the Thai government implemented travel restrictions to curb the spread of the coronavirus outbreak. Though some domestic flights have resumed, all international flights remain canceled until the end of June.

Photo by Toshi Aoki